By  on January 23, 2006

NEW YORK — Russell Corp.'s plan to cut 2,300 workers and shift more business overseas as part of a major restructuring came after a year in which the athletic giant was hampered by higher costs, lower sales in its core business and operational problems partly related to Hurricanes Rita and Katrina.

The storms disrupted the company's supply channel — 40 containers of "critical products" were lost or damaged — forcing the firm to pay more to expedite orders. Wal-Mart said it would discontinue Russell's boys fleece program, which represented $30 million to $40 million in sales, and polyester prices soared to 82 cents a pound on Oct. 24, from 69 cents on Sept. 26.

Last year "was a difficult and disappointing year for us," Jack Ward, Russell's chairman and chief executive officer, said on a call with analysts Friday. "We faced unanticipated operational issues resulting in lost sales, higher manufacturing variances and higher distribution costs....We suffered lower than anticipated sales throughout the balance of the year with missed sales and lost reorder opportunities."

Russell's sales in the nine months ended Oct. 2 gained 12 percent to $1.08 billion, but much of that increase was driven by acquisitions such as Brooks Running.

The athletic apparel company said last Thursday night that it would cut 1,700 positions in the U.S. and the remainder abroad, and freeze retirement benefits as it moves more of its operations to foreign countries.

Wall Street responded positively to the new strategy, sending shares up 8 percent to close at $14.52 Friday in New York Stock Exchange trading.

As part of the overhaul, the operations of Russell's women's activewear brand Moving Comfort will be merged with Russell's athletic division, Ward said.

"We have already begun the consolidation of Moving Comfort into our Russell Athletic Group," he noted.

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